Welcome to Financial Advisor IQ

Simpler Series 7s (and Fresh Industry Talent?) Are Almost Upon Us

By Miriam Rozen August 20, 2018

In less than two months — on Oct.1 — when Finra is scheduled to launch its new streamlined competency exams, get ready for a dramatic change. For the first time in the history of the industry self-regulator, anyone more than 18 years old -- including students and aspiring broker-dealer representatives, even if they have not yet been hired by financial firms -- may take a Finra entrance exam. No firm affiliation is necessary.

What prompted Finra to initiate the unprecedented opportunities? Its thirst for youth, according to recruiters and a former Finra official.

“One of Finra’s existential challenges is the decline of the broker-dealer model and that every year the average age of stockbrokers goes up by more than a year. This is an effort to make it easier to get people, young people, to consider coming into the industry,” says J. Bradley Bennett, a partner at law firm Baker Botts in Washington, D.C. who served from 2011 to 2017 as Finra’s executive vice president and chief of enforcement.

“It strikes me as reflective of the fact that there is a shortage of young advisors,” says Danny Sarch, a recruiter and the president of White Plains, N.Y.-based Leitner Sarch Consultants.

Finra could, with its streamlining of the exams, be engaged in “dumbing it down,” Sarch says. If such a change is taking place, he observes, “I don’t see how that is good for the credibility of the industry. The public is suspicious enough.”

But others familiar with the adjustments to the Finra exams dismiss such concerns. With its streamlining, Finra is simply responding to reasonable criticism of the existing exams, says Howard Diamond, the chief operating officer and general counsel of Diamond Consultants, a New York-based recruiting firm.

Finra “took out some duplicative sections,” he says. Diamond applauds the opening of exam opportunities for test-takers not affiliated with firms yet. The new policy is “a great idea to entice more people into the industry,” Diamond says.

But few broker-dealer employers have begun to focus on the prospect of new pool of candidates who on their own initiative undergo the testing, he says. The employers will do so eventually, Diamond predicts.

“I think at this point it’s not on anybody’s radar,” he adds. But when those employers start hiring such prospects, “it will be a boon to the industry,” Diamond argues. It will help the industry identify more quickly prospects who have “an aptitude” for financial advising, he says. “Anything you can do to bring qualified young people to the industry is good,” he says.

How will Finra evaluate if its streamlining and easier access for test takers rates as a success story?


“A good way to measure will be the number of stockbrokers,” Bennett, the former Finra executive, says. According to Finra statistics, that figure has been declining by about 1% each year since 2015, dropping in June to 629,080, the lowest number since 2011. But, if those numbers start increasing in the next few years, Finra’s overhaul of its exams will have served its purpose, Bennett says.